The outcome of the Greek elections and hope for more action from the Federal Reserve has taken some pressure off Europe’s financial markets. European stocks have rallied in recent days and bond yields in Spain and Italy fell Wednesday after the G20 made unspecified pledges to “take all necessary policy measures to safeguard the integrity and stability of the (euro) area.”
Still, George Soros, Joseph Stiglitz and Christine Lagarde (among others) have joined Paul Krugman in predicting Europe is rapidly running out of time to address its crisis. (See: Stiglitz on Europe: Soros Is “Being Generous” Giving Them Three Months)
As was the case in mid-May, Eurasia Group’s Ian Bremmer believes such talk is overblown.
“I’m sanguine in the sense I think we do have some time — still,” Bremmer says. “There still is capacity to kick the can down the road and I do not believe the eurozone is ultimately going to fragment.”
Yes, the likelihood of a Greek exit from the euro has risen and the ‘kick-the-can’ strategy is “fraught with danger,” he admits. “[But] ultimately I’m much more optimistic about the eurozone staying together and becoming better governed than it was before this entire crisis.”
Part of Bremmer’s optimism stems from a belief there is “political utility” (vs. economic utility) to all the “band-aids” and stopgap solutions in Europe. The question now is whether EU leaders use the time wisely and constructively.
While there was little concrete progress at the G20 meeting to address the crisis, that’s no surprise to Bremmer, whose most recent book Every Nation For Itself is premised on the idea we’ve entered a new “G-Zero” era.
Much more critical than the G20 confab is the European Union Summit on June 28-29. Bremmer expects that meeting to end with a “road map that’s explicit” for how the EU is going to develop a banking union and a fiscal union. “This is what the Germans want,” he says. “If you can actually make real progress on the political side then I think the more structural compromise that will be needed by the Germans…becomes more doable.”
So mark your calendars for June 28-29, the next (scheduled) stop for Europe’s slow-motion train wreck, which just keeps rolling along.
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at firstname.lastname@example.org
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